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Iran vehicle manufacturers eye PSA Peugeot Citroen as a reviver

Iran's vehicle manufacturers are faced with both rising production costs and lacking some details as to how to manufacture cars after the giant international auto companies left Iran because of sanctions aimed to curb the country's disputed nuclear programme. These include Italian Fiat, German General Motors and its French partner PSA Peugeot Citroen, South Korean Hyundai and the Japanese Toyota Motor Corporation, etc.

Iran's auto production decreased 66 per cent in September 2012 compared to September 2011, while the country's total auto production dropped by 42 per cent in the first half of current Iranian solar year, started on March 19, compared to the same period in 2011.

On the other hand, Iran's major car producer Iran Khodro which had been a partner of France's Peugeot since 1989, had to close some production units and it raised its production prices by 10 per cent last month, while Iran's other major automaker Saypa increased its car prices by 18 per cent.

Previously, Iranian ILNA reported in September that auto prices in Iran had increased by 35 per cent on average during first half of this solar year.

Mohammad Reza Najafi Manesh a board member of the Iranian Auto Parts Manufacturers Association announced on Nov.18 that Peugeot is keen to return to Iran, in which case it could receive revenue from its exported production to Iran.

Mohammad Bayatian a member of Iranian Parliament's Industry Committee told ISNA on Nov.19 that if Peugeot returns to the Iranian market, the country's car output would be increased once again.

Peugeot has not confirmed its alleged proposal to Iran officially, but regarding its increasingly financial problems, this seems believable, because Iran was Peugeot's second major market. PSA Peugeot Citroen Group, Europe's second biggest auto company, left Iran in February 2012, because of problems in financial transactions due to imposed sanctions on Iran's banking system. The financial situation for Peugeot is also not favourable.

On Oct.24 the French auto company released its performance figures during the third quarter of 2012, saying in this period group revenues were €12.93 billion, down 3.9 per cent compared with the previous year. The French car manufacturer blamed financing problems for its February decision to halt sales to Iran, Peugeot brand's second biggest market following tighter international sanctions and the attendant financing difficulties affecting payments. It had warned about this earlier this month when announcing 8000 French job cuts and a plant closure.

It is not clear how Iran would be able to eliminate payment problems en route of restarting cooperation with Peugeot, while western sanctions on its banking system remains unchanged, but in case the French company does return to Iran, it would not lead to a decrease auto prices in the country.

The Iranian government suspended the provision of the USD for the auto sector at the official rate which is 12, 260 rials. Iranian automakers have to get USD from Iran's Forex Centre which is two-fold more expensive than the official rate, but they could revive some closed units and increase auto production volume.